According to latest research compiled by the Local Data Company (LDC), commissioned by PwC, a total of 3,488 new shops were opened in the period, compared with 8,739 closures, a net decline of 5,251
As reported by RetailSector.co.uk, it means that more than 8,700 chain stores have disappeared from UK high street retail locations in the first half of 2021, a figure that equates to exactly 47 stores per day.
The intensity of store closures varies greatly across locations. The highest numbers seem to have been in the cities and towns, whereas some country rural regions have been far less affected, such as for example, the South East and East Anglia which have been have been largely unaffected as homeworkers throughout Covid have been shopping locally.
Scotland and Wales have been hit harder because of their policies of longer lockdowns. Whereas the rest of the UK has seen a slowing up of closures for 2020 to 2021, these other nations has seen the reverse, with a higher incidence of closures this year than last.
Why have retailers suffered so much?
The multiple reasons for the many issues facing retailers:
- The high cost of running physical retail outlets, bricks and mortar stores includes rents, business rates and high labour costs
- The generally lowering of profits due to the high costs lead to slow sales growth and squeezed profit margins due to aggressive price competition
- The rapid growth during and before the Covid pandemic of online competition for high street sales. Online sales as a percentage of retail total sales reached 36.5 per cent during early 2021 before dropping back to around 26 per cent today.
- Lack of forward planning on the part of many retailers and low investment in stores has meant many retailers have failed meet the challenges of the new retailing environment and hence the many bankruptcies and administrations.
The Coronavirus Lockdowns have had a devastation effect on retailing, hotels, travel and leisure, trumping all of the above, and depriving the majority of stores of their normal revenues during the Lockdown periods.
On the other hand trade has gone to those businesses that were geared up for online. Although government has piled a lot of money into the retail sector ‘to preserve jobs’, retail traditional bricks and mortar businesses cannot operate, compete and survive with zero revenue and constant threats of pandemic driven closures.
Retail parks on the whole, with fewer closures, fared better than most high streets and shopping centres, with many outperforming because they were anchored around grocery, DIY and home furnishings, and they offer easy vehicle access.
Lisa Hooker, consumer markets lead at PwC, told RetailSector.co.uk:
“After an acceleration in store closures last year coupled with last minute Christmas tier restrictions and lockdowns extending into 2021, we might have expected a higher number of store closures this year.
“Government support has proved to be the lifeline for many to weather the storm and survive the pandemic. There is also continued uncertainty for hospitality businesses who will be apprehensive of further restrictions on operating and the possible requirement for vaccine passports later in the year.”
“Consumers still want a physical shopping experience and a number of chain stores and restaurants are opening. There is opportunity for operators who can be nimble, taking advantage of the current situation to either open new stores or to move stores to better locations.”
The need for social distancing, queues to enter stores, and frequent requests to use hand sanitisers and ‘not to touch merchandise unless you are going to buy it’ has robbed shoppers of a lot of the pleasure in shopping, making it rather a hazardous chore.
Similarly, the need for what is left of the leisure economy, the tea shops, the coffee shops, restaurants and public houses to apply preserve the social distancing makes the whole experience less relaxing than it was, though the restriction are now beginning to be lifted.
Quite a number of formerly important retailers have already gone bankrupt. More will now likely do so, especially as the furlough scheme ends in a couple of weeks’ time. Many other companies who find themselves in a good financial position, with a substantial online offer as well as physical stores will not go bust, but they may have to rationalise their store portfolios, closing the less profitable ones and finding new more profitable locations.
The retail crisis in jobs, businesses, stores and high streets has been coming for a long time, but it has been massively accelerated by the Covid pandemic. We have yet to see how the cards will finally fall, but there is no doubt at all the will be dramatic and long-lasting changes to the retail property market.
Change always brings opportunities, so it will be up to the savvy investor to spot these early on.